A year on from the regulator's ban on contingent charging, which has seen many advice firms leave the DB space, one firm explains why its DB business has boomed.
Pension Works head of business development Will King explained his firm has gone the opposite way to many advisers and has grown rapidly in the defined benefit space in the past year.
Pension Works focuses on DB transfer advice as a specialist advice firm, which other advisers can outsource their business to.
Speaking to FTAdviser yesterday (October 13), King said: “There's very few firms that are doing what we're doing and very much going the other way.
"To do [what we are doing], you need to have an extremely slick operational side of things and you have to be at the forefront in terms of technology, in terms of staffing and training and internal processes and protocols.”
The Financial Conduct Authority has come down hard on the DB advice space in the wake of the British Steel pension transfer scandal.
Since 2018 the DB adviser sector has shrunk by two thirds, from 3,000 firms to 1,200 now.
Data from the Financial Conduct Authority also showed between June 5, 2020, when the contingent charging ban was implemented, and July 31, 2021, 687 firms gave up their permissions.
It came after a similar number, 700 advice firms, relinquished their permissions in the lead up to June 5, in the wake of the FCA's crackdown on unsuitable advice.
King said: “The big thing in any right is that there are so many firms, every year, dropping out of offering DB pension advice because it's so highly scrutinised by the regulator - it's a highly complex area and always has been.
“You're working to timescales because they have a timescale on CTV values so that makes life difficult and the big one is the difficulty in getting PI cover as well.”
He explained many generalist advice firms have decided not to renew their DB permissions or were being forced not to renew.
“It makes sense if you're only doing a case every three months or six months - why would you do that and take on the liability for those few cases when you don't need to,” he said.
PII issues will remain
Professional indemnity insurance is an ongoing issue for financial advisers and one which Pension Works also recognises.
King said his firm had a strong relationship with its insurer so the firm was provided an extended period for the latest renewal.
“They said that they want to work with us ongoing because of the nature of our model, which is really good to hear, because obviously a lot of people are hearing the opposite of that, or having fees and costs going through the roof because they're dealing with a defined benefit advice.
“It's good to know that there are some insurers still out there who are willing to insure those of us who are still involved in DB. I think it's just because of the length of our relationship with them and because of no issues that we've ever had with them, that's stood us in good stead and allowed us to build a good foundation to build the model that we've built.”